Aug. 1 (Bloomberg) -- The yen strengthened against most of
its major peers as Asian stocks slid amid signs manufacturing is
slowing across the globe, boosting demand for refuge assets.

Japan’s currency climbed against the euro after a
purchasing managers’ index in China showed the slowest
manufacturing expansion in eight months and before a European
factory gauge that’s forecast to show a decline this month. The
dollar touched a two-month low against the yen as a signs of
economic slowdown in the U.S. boosted speculation the Federal
Reserve will signal additional monetary easing at the end of its
meeting today.

“The market is shifting to a risk-off stance on the back
of stocks declines and weaker Chinese economic data,” said
Junya Tanase, chief currency strategist at JPMorgan Chase & Co.
in Tokyo. “The yen is being bought in a bid for safety.”

The yen strengthened 0.2 percent to 95.93 per euro as of
2:16 p.m. in Tokyo. Japan’s currency added 0.1 percent to 78.03
per dollar after touching 77.91, the strongest since June 1. The
euro was little changed at $1.2295 from $1.2304 yesterday.

China’s PMI dipped to 50.1 in July from 50.2 in June, the
National Bureau of Statistics and the China Federation of
Logistics and Purchasing said today. Economists in a Bloomberg
News survey predicted a reading of 50.5, while 50 is the
dividing line between growth and contraction. That followed
figures from Australia that showed manufacturing declined to a
three-year low last month.

European Manufacturing

London-based Markit Economics is expected to confirm today
that a gauge of euro-region manufacturing declined to 44.1 in
July, according to a Bloomberg survey of economists. That would
be in line with an earlier reading and the lowest since June
2009.

The yen tends to appreciate during periods of financial
turmoil because Japan’s current-account surplus makes it less
reliant on foreign capital. It has surged 6.2 percent in the
past three months, the most among 10 developed-market currencies
tracked by Bloomberg Correlation-Weighted Indexes. The euro has
lost 4.9 percent while the dollar added 3.2 percent.

“The debt crisis will not be resolved any time soon and
that will continue to weigh on the euro in the longer term,”
said Kengo Suzuki, a foreign-exchange strategist in Tokyo at
Mizuho Securities Co., a unit of Japan’s third-largest bank by
market value. “Economies in the region will deteriorate as
governments around the region move toward austerity.”

Budget Cuts

Spanish Economy Minister Luis de Guindos is pushing for
additional budget cuts after his German counterpart, Wolfgang
Schaeuble, signaled to him that such a move would be rewarded by
bond market assistance, according to two people in Madrid
familiar with his thinking.

De Guindos wants further cuts in health and education
spending after Schaeuble told him that such a move would enable
Germany to support any steps by the European Central Bank to
push down Spanish borrowing costs, said the people, who asked
not to be named as the discussions were confidential. ECB
President Mario Draghi also backs de Guindos’s push, said one of
the people. The ECB’s Governing Council meets in Frankfurt
tomorrow.

Yields on Spanish government 10-year bonds climbed to 6.75
percent yesterday, toward the euro-era record of 7.75 percent
set on July 25.

U.S. Employment

Demand for the dollar was limited before a private payrolls
report today forecast to show the pace of hiring in the U.S.
slowed, supporting bets the Fed will signal additional stimulus
which would debase the currency. Companies probably added
120,000 jobs last month, down from 176,000 in June, according to
the median estimate of economists surveyed by Bloomberg before
ADP Employer Services releases its data today.

The Labor Department is scheduled to release its monthly
jobs report on Aug. 3, with the unemployment rate predicted to
remain unchanged at 8.2 percent, according to a separate poll.

The U.S. central bank bought $2.3 trillion of securities in
two rounds of asset purchases from 2008 to 2011 in a bid to spur
growth, and it has said its benchmark interest rate will stay at
“exceptionally low levels” at least through late 2014. While
the Fed refrained from introducing a third round of asset
purchases known as quantitative easing at its June meeting,
Bernanke indicated it’s an option.

“I think the Fed will ease as the growth in the U.S.
economy is clearly slowing,” said Mizuho’s Suzuki. “The Fed
most likely will lengthen its pledge to keep interest rates low.
That could be a catalyst for the dollar to be sold.”

The Dollar Index, which Intercontinental Exchange Inc. uses
to track the greenback against the currencies of six major U.S.
trading partners, was at 82.69, little changed from yesterday.
The gauge touched 82.34 on July 27, the lowest since July 5.